Gold (XAU/USD): Overstretched uptrend, risk of minor pull-back below $4,012

[Ben Graham]

Key takeaways

• Gold (XAU/USD) surged 8.5% since late September, breaking above US$4,000 to hit a new all-time high of US$4,059.
• The rally is driven by demand for inflation hedges and fears of fiat currency debasement amid fiscal concerns.
• Technical indicators show an overstretched uptrend, raising the risk of a short-term pullback below US$4,012.
• The medium-term uptrend remains intact, as Gold stays above its key 20-day and 50-day moving averages.

This is a follow-up analysis and a timely update of our prior publication, “Gold (XAU/USD): In a bullish consolidation above US$3,688 despite a firmer US dollar”, published on 26 September 2025.

The price actions of Gold (XAU/USD) have indeed shaped the expected bullish impulsive up move sequence and rallied by 8.5% since 26 September 2025, broke above the US$3,865 resistance highlighted in our previous analysis, and hit a fresh all-time intraday high of US$4,059 on Wednesday, 8 October 2025.

Interestingly, the US dollar also rebounded over the same period, where the US Dollar Index rose by 1.4% to hit a two-month high.

Inflation hedge and debasement trade are supporting the major uptrend in Gold

The macro narrative that is supporting the ongoing major bullish trend in the previous yellow metal that surpassed the key US$4,000 psychological level has been a sticky inflation trend in the US (as an inflationary hedge), and “debasement trade” where growing fiscal concerns in the world’s biggest economies, such as the US, led to a bet against (distrust) fiat currencies.

Macro factors drive the medium-term and longer-term trends, but within such trends, there will be mean-reversion price action behaviours that can last for multiple days as leveraged speculators adjust their positions.

At this juncture, the current seven-week of bullish acceleration in Gold (XAU/USD) has reached a potential tipping point for a multi-day mean reversion decline within its medium-term uptrend phase.

Fig. 1: Gold (XAU/USD) minor trend as of 10 Oct 2025 (Source: TradingView)

Fig. 2: Gold (XAU/USD) medium-term & major trends as of 10 Oct 2025 (Source: TradingView)

Preferred trend bias (1-3 days)

Bearish bias below US$4,012 for a potential mean reversion decline scenario to unfold for Gold (XAU/USD) within its medium-term uptrend to expose the intermediate supports at US$3,892, US$3,864, and US$3,834/3,819 (also the rising 20-day moving average) (see Fig. 1)

Key elements

• The medium-term uptrend phase for Gold (XAU/USD) since the bullish breakout of its “Ascending Triangle” range resistance on 29 August 2025 remains intact as price actions remain above its 20-day and 50-day moving averages (see Fig. 2)
• The daily Bollinger Bandwidth of Gold (XAU/USD), a measurement of the volatility of its trend, has jumped significantly from 26 September 2025’s value of 8.6 to 9 October 2025’s value of 12.7 (see Fig. 2).
• This observation, seen in the Bollinger Bandwidth, suggests the current medium-term uptrend phase has reached an overstretched condition that increases the risk of a mean reversion decline scenario for Gold (XAU/USD) (see Fig. 2).
• The hourly RSI momentum indicator of Gold (XAU/USD) has continued to flash out a short-term bearish momentum condition as it remained capped below a descending resistance at the 50 level, in turn supporting a mean reversion decline scenario (see Fig. 1).

Alternative trend bias (1 to 3 days)

A clearance above the US$4,012 key short-term resistance on Gold (XAU/USD) invalidates the mean reversion decline scenario to kickstart a new bullish impulsive up move sequence for the next intermediate resistances to come in at US$4,084/4,087 and US$4,122/4,150.

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